For an entrepreneur or small or mid-sized business, practical problems can turn into sales and growth prospects. What the enterprise needs is a method of generating solutions to the problems, a step toward identifying viable business opportunities. The opportunity must be market-based and the business idea must be market-driven.
"The Entrepreneurial Spirit" by Michael Liepner, Herve de Jordy and Michael Schultz, contains a list of everyday "problems," such as telephone solicitation and poor retail service. Simply restating the problems may suggest business opportunities - perhaps a product or service to reduce telephone solicitation, or ways to improve retail service. Specifying the particular product or service has to wait until after you generate and evaluate several solutions. So how to successfully generate ideas or solutions to problems?
In his book, "A Whack on the Side of the Head and A Kick in the Seat of the Pants," Roger Von Oech suggests four specific roles for the entrepreneur in generating, evaluating and implementing ideas, as follows:
Explorer: Searching for new information
Artist: Developing new ideas from available resources
Judge: Evaluating an idea
Warrior: Carrying an idea into action.
The first two roles belong in the realm of idea generation. Exploring information about the opportunity helps ensure that the process focuses on the market. The next step is to formulate as many ideas as possible by approaching the opportunity as an artist would approach a blank canvas.
Developing ideas for products or services requires creative thought. And being creative calls for right-brain or "soft" thinking, as opposed to logical left-brain or "hard" thinking. While hard thinking is necessary for evaluating ideas, it actually impedes the creative process necessary to generate ideas.
Being creative also takes practice and is often more productive undertaken in a group of people with varying perceptions or a particular subject. Here are a few tips for creative idea generation:
* Get away from your regular routine. A different environment can often stimulate creative thought. Rent space in a hotel or other location away from the phones and other distractions. Try a room with soft lighting and comfortable chairs without desks or tables.
* Hire an experienced facilitator who is trained to direct and stimulate creative group thinking. His or her main skills include the abilities to listen, to interpret and synthesize as well as to put individuals at ease and encourage ideas.
* Have the facilitator record the group's ideas on sheets of foolscap and hang the sheets around the walls.
* Don't judge suggestions during the idea generation stage. Group members should be free to express whatever enters their minds. The goal is to generate as many ideas as possible before whittling down the list.
* Consider breaking into several small groups--perhaps by management level-to conduct simultaneous idea generation processes. Then combine the results during the evaluation stage.
* Run through the collected ideas to make sure the group understands them. Look for duplication of ideas, or concepts that might be combined or clarified.
* Don't extend the session artificially. Let the facilitator gauge the mood of the group and end the idea generation process when ideas tail off.
* You needn't convene a group to generate and record good ideas. Keep paper and pencil handy for jotting down those thoughts that occasionally bubble up from the subconscious.
* Look for resources that can help in generating ideas. For example, the Canadian Industrial Innovation Centre in Waterloo, Ont., holds a twice-yearly conference on idea generation, evaluation and new venture formation.
This process is far from foolproof. Management or workers may lack commitment, particularly if it's difficult to identify an immediate payoff from the exercise. Try to emphasize the long-term benefits of the session. Find a champion or promoter for the idea, preferably in the organization's upper echelons.
Rather than a one-off session, idea generation should be an ongoing process as routine as, say, budgeting. Many organizations only explore ideas when confronted by a problem, but this is being reactive, not proactive.
For the entrepreneur, there are benefits in restating problems as opportunities and generating ideas to satisfy those opportunities. For the management accountant, the exercise provides insight into how the entrepreneurial mind sees opportunities in problems and how new ventures are created. These insights might enable the management accountant to help entrepreneurs find the right facilitators or help with the succeeding process: idea evaluation.
Thursday, June 3, 2010
Consulting to entrepreneurs - getting started
An individual wishing to consult effectively to entrepreneurs should first understand the process of venture creation. Once comfortable that you have a feel for the process, you must take inventory of your experience, education, and interests. From this self-analysis, you should be able to determine your potential contribution to the process of venture creation.
The nature of a specific venture may be such that you will become a member of the founding group. If so, you must develop commitment to the venture, have the motivation to make the venture happen, make sacrificies, and risk never being compensated for your time, energy and out-of-pocket expenses. You may be asked to invest your own cash in venture.
If you are not completely comfortable with the terms of this arrangement, being a member of the founding team will not be feasible or desirable for you. Acting as a consultant on a fee-for-service basis may be the preferred option for you.
If you are going to be a consultant, taking inventory of skills and experience is a critical first step. You must determine where you can make the best contribution and the area(s) where other professionals must be involved. To position yourself as a one-stop consulting service to the entrepreneur may be misleading to both yourself and to the client.
Perhaps the most important concern for the entrepreneur is identifying the real business opportunity and shapping the new venture to best take advantage in the marketplace. This step is a very creative one, requiring a special kind of thinking on the part of the venture founders and guidance from someone who has related and relevant experience. Unless this is your strength, avoid consulting in this area.
The technical or engineering aspect of the venture together with the marketing considerations -- market research and market strategy -- probably requires the advice of professionals in addition to the management accountant. There is very important role to be played here. As a professional, you may be in a position to refer a client to another professional. Your referral will add important credibility to the client and to the venture, in the eyes of other proffessionals. This networking function is key to sucess for an entrepreneur who often doesn't know where to turn, and is consequently at risk.
Perhaps the most important contribution the management accountant can make to the new venture is in helping to develop the business plan. I do not mean for the consultant to write the plan, but rather to provide direction and structure to the process and to ensure that all the important issues are adressed in a satisfactory manner.
With respect to the financial section of the plan, the education and experience of the managment accountant allow a significant professional contribution. This is often the weakest area for the entrepreneur. Dealing withit inadequately is the main reason for the failure of many start-up ventures. The involvement of the management accountant will add substance, and credibility to the plan, and should open doors dor its presentation, encouraging serious consideration by bankers and other investors.
What about fees? I strongly recommend that you address fees with the client at the outset of the engagement. Recognize that you may need to modify your hourly fee given the circumstances of the client. If the required modification is too great considering the financial demands of your own business, you may have to part with the prospective client. Remember that your contribution has value. Acting strictly as a consultant, you must be compensated or your time, as there is no equity sharing for you.
Once you agree upon a rate of compensation, either hourly or on some other mutually agreeable basis, document the specifics of the work that you to do in a proposal letter, including the terms of payment. Have the client sign in acceptance of your proposal. This is an important communication process that will help to avoid any misunderstandings about what you have agreed to do, and for how much. It will provide the basis for the working relationship throughout the term of the engagement. I would also recommend that you ask the client for a deposit up front as an indication of commitment to you, against which you will bill future work.
As a consultant, you should adopt an emphasis on "output" when dealing with the entrepreneurial client. Rather than simply focusing on the number of hours you have put into the project, be mindful of what has been achieved and what progress has been made. Achievement is foremost in the mind of the entrepreneur. Achievement is what brings satisfaction to the entrepreneur.
The nature of a specific venture may be such that you will become a member of the founding group. If so, you must develop commitment to the venture, have the motivation to make the venture happen, make sacrificies, and risk never being compensated for your time, energy and out-of-pocket expenses. You may be asked to invest your own cash in venture.
If you are not completely comfortable with the terms of this arrangement, being a member of the founding team will not be feasible or desirable for you. Acting as a consultant on a fee-for-service basis may be the preferred option for you.
If you are going to be a consultant, taking inventory of skills and experience is a critical first step. You must determine where you can make the best contribution and the area(s) where other professionals must be involved. To position yourself as a one-stop consulting service to the entrepreneur may be misleading to both yourself and to the client.
Perhaps the most important concern for the entrepreneur is identifying the real business opportunity and shapping the new venture to best take advantage in the marketplace. This step is a very creative one, requiring a special kind of thinking on the part of the venture founders and guidance from someone who has related and relevant experience. Unless this is your strength, avoid consulting in this area.
The technical or engineering aspect of the venture together with the marketing considerations -- market research and market strategy -- probably requires the advice of professionals in addition to the management accountant. There is very important role to be played here. As a professional, you may be in a position to refer a client to another professional. Your referral will add important credibility to the client and to the venture, in the eyes of other proffessionals. This networking function is key to sucess for an entrepreneur who often doesn't know where to turn, and is consequently at risk.
Perhaps the most important contribution the management accountant can make to the new venture is in helping to develop the business plan. I do not mean for the consultant to write the plan, but rather to provide direction and structure to the process and to ensure that all the important issues are adressed in a satisfactory manner.
With respect to the financial section of the plan, the education and experience of the managment accountant allow a significant professional contribution. This is often the weakest area for the entrepreneur. Dealing withit inadequately is the main reason for the failure of many start-up ventures. The involvement of the management accountant will add substance, and credibility to the plan, and should open doors dor its presentation, encouraging serious consideration by bankers and other investors.
What about fees? I strongly recommend that you address fees with the client at the outset of the engagement. Recognize that you may need to modify your hourly fee given the circumstances of the client. If the required modification is too great considering the financial demands of your own business, you may have to part with the prospective client. Remember that your contribution has value. Acting strictly as a consultant, you must be compensated or your time, as there is no equity sharing for you.
Once you agree upon a rate of compensation, either hourly or on some other mutually agreeable basis, document the specifics of the work that you to do in a proposal letter, including the terms of payment. Have the client sign in acceptance of your proposal. This is an important communication process that will help to avoid any misunderstandings about what you have agreed to do, and for how much. It will provide the basis for the working relationship throughout the term of the engagement. I would also recommend that you ask the client for a deposit up front as an indication of commitment to you, against which you will bill future work.
As a consultant, you should adopt an emphasis on "output" when dealing with the entrepreneurial client. Rather than simply focusing on the number of hours you have put into the project, be mindful of what has been achieved and what progress has been made. Achievement is foremost in the mind of the entrepreneur. Achievement is what brings satisfaction to the entrepreneur.
Finding a business opportunity
In this second article in the series on entrepreneurship, we look at the process of coming up with a good business idea.
If you feel you have what it takes to be an entrepreneur, your next step is to identify opportunities and match them with innovative solutions. Perhaps the most difficult thing to learn is how to become sensitive to opportunities.
The first thing to recognize is that identifying opportunities takes a commitment to practice in order to gain any measurable proficiency. You should be prepared to practice opportunity identification regularly if you want to master the ability.
Second, this is an activity we often have not been trained for anywhere in our educational experience. In fact, our education has probably contributed to our inability to recognize opportunities.
In the spring of 1990, I taught entrepreneurship to high school teachers at the University of Toronto. That summer, as part of a conference sponsored by the Innovation Centre in Waterloo, I presented workshops in North Bay and Toronto to other groups of high school teachers. A topic of prime consideration at each of these "train the trainers" sessions was understanding the nature and process of opportunity identification and how to teach it to others.
This course is recognized to be very different from the usual business course given in Ontario's schools. A key aspect is the emphasis given to identifying opportunities and developing creative solutions. This is clearly a first and I relate the situation to provide some background and credibility to the approach presented in this article.
How do you start? Start by becoming sensitive to your environment! Typically, the entrepreneur can look at situations where most of us see nothing but chaos and identify an opportunity. This is a unique ability that is cultivated over time through practice. The question for you, therefore, becomes twofold: How can I become sensitive to my environment? How can I discern opportunities?
To develop an appreciation of the entrepreneur's ability to identify opportunities, I asked workshop participants to consider our location as their entrepreneurial environment. Their task was, in about 20 minutes, to identify 15 or 20 problems or shortcomings with their immediate environment.
It is often not difficult for anyone to perform such an exercise and come up with a lengthy list of issues. The effort must be a conscious one, however, as most of us are so familiar with our everyday environment that we become oblivious to it. But if our environment changes, we are forced to be more conscious of it.
When everyone in the workshop had completed their list, we gathered together to look at all the problems and identify the best for further analysis. The next step was to consider the problem as defined and determine if it was the "real" problem or a symptom. If it was a symptom, through discussion, the problem was determined and articulated.
Once we are sure about the problem, the next question is: "What opportunity is created by this problem?" It is often said the entrepreneur sees the glass as half full rather than half empty--opportunities rather than problems. An objective of the exercise was to allow individuals to experience the process of identifying opportunities by first noting and becoming comfortable with problems.
A problem I became acutely aware of shortly after moving to Florida, for example, was the difficulty in obtaining any Canadian news! With more than half a million Canadians living in the Clearwater area permanently or temporarily, this "problem" is really an opportunity. Perhaps there are others who would like to receive Canadian news regularly and pay for this service.
Another example is the complete absence of rust on automobiles in the south. Cars as old as ten years were still in showroom condition and did not require major body and paint work. The problem of rust in Canada creates an opportunity for the entrepreneur who establishes an auto body and paint shop. More recently, it has also created an opportunity for the entrepreneur to import used "salt-free" Florida automobiles to southern Ontario. Under the Free Trade Agreement, automobiles six years old or older can be imported into Canada. You should consult with legal counsel for specific details before pursuing this potential opportunity further.
Once the opportunity is identified and articulated, a brainstorming exercise should be undertaken to generate a number of solutions. This idea stage should be void of any judgment or evaluation. Remember, the worst thing that can happen at this stage is that you come up with only one idea! Recall the statistics quoted in the first article--your chances of coming up with the "right" idea the first time are about 1 or 2%.
If you feel you have what it takes to be an entrepreneur, your next step is to identify opportunities and match them with innovative solutions. Perhaps the most difficult thing to learn is how to become sensitive to opportunities.
The first thing to recognize is that identifying opportunities takes a commitment to practice in order to gain any measurable proficiency. You should be prepared to practice opportunity identification regularly if you want to master the ability.
Second, this is an activity we often have not been trained for anywhere in our educational experience. In fact, our education has probably contributed to our inability to recognize opportunities.
In the spring of 1990, I taught entrepreneurship to high school teachers at the University of Toronto. That summer, as part of a conference sponsored by the Innovation Centre in Waterloo, I presented workshops in North Bay and Toronto to other groups of high school teachers. A topic of prime consideration at each of these "train the trainers" sessions was understanding the nature and process of opportunity identification and how to teach it to others.
This course is recognized to be very different from the usual business course given in Ontario's schools. A key aspect is the emphasis given to identifying opportunities and developing creative solutions. This is clearly a first and I relate the situation to provide some background and credibility to the approach presented in this article.
How do you start? Start by becoming sensitive to your environment! Typically, the entrepreneur can look at situations where most of us see nothing but chaos and identify an opportunity. This is a unique ability that is cultivated over time through practice. The question for you, therefore, becomes twofold: How can I become sensitive to my environment? How can I discern opportunities?
To develop an appreciation of the entrepreneur's ability to identify opportunities, I asked workshop participants to consider our location as their entrepreneurial environment. Their task was, in about 20 minutes, to identify 15 or 20 problems or shortcomings with their immediate environment.
It is often not difficult for anyone to perform such an exercise and come up with a lengthy list of issues. The effort must be a conscious one, however, as most of us are so familiar with our everyday environment that we become oblivious to it. But if our environment changes, we are forced to be more conscious of it.
When everyone in the workshop had completed their list, we gathered together to look at all the problems and identify the best for further analysis. The next step was to consider the problem as defined and determine if it was the "real" problem or a symptom. If it was a symptom, through discussion, the problem was determined and articulated.
Once we are sure about the problem, the next question is: "What opportunity is created by this problem?" It is often said the entrepreneur sees the glass as half full rather than half empty--opportunities rather than problems. An objective of the exercise was to allow individuals to experience the process of identifying opportunities by first noting and becoming comfortable with problems.
A problem I became acutely aware of shortly after moving to Florida, for example, was the difficulty in obtaining any Canadian news! With more than half a million Canadians living in the Clearwater area permanently or temporarily, this "problem" is really an opportunity. Perhaps there are others who would like to receive Canadian news regularly and pay for this service.
Another example is the complete absence of rust on automobiles in the south. Cars as old as ten years were still in showroom condition and did not require major body and paint work. The problem of rust in Canada creates an opportunity for the entrepreneur who establishes an auto body and paint shop. More recently, it has also created an opportunity for the entrepreneur to import used "salt-free" Florida automobiles to southern Ontario. Under the Free Trade Agreement, automobiles six years old or older can be imported into Canada. You should consult with legal counsel for specific details before pursuing this potential opportunity further.
Once the opportunity is identified and articulated, a brainstorming exercise should be undertaken to generate a number of solutions. This idea stage should be void of any judgment or evaluation. Remember, the worst thing that can happen at this stage is that you come up with only one idea! Recall the statistics quoted in the first article--your chances of coming up with the "right" idea the first time are about 1 or 2%.
An introduction to entrepreneurship
This article is the first in a series focusing on entrepreneurship and the role of the management accountant. A primary objective is to help management accountants relate better to entrepreneurs and their needs. Consequently, they will be able to provide better service to this growing and important client group. For those management accountants who are entrepreneurs at heart, the series is also designed to be somewhat of a "how to" manual!
When we talk about entrepreneurship, we are generally talking about the creation of new ventures. These ventures have been conceived and created by individuals where nothing previously existed. Entrepreneurship is therefore very much focused on individuals rather than enterprises.
It is the individual who must have the vision of the venture and the energy to make it a reality. Besides possessing drive, motivation and commitment, he or she must we willing to make sacrifices and take calculated risks in the interest of the new venture.
It is the individual who must identify the opportunity, evaluate its feasibility, determine if it really is a viable business, and bring together the resources to make the vision a reality. This includes building the management team, preparing the plan, and seeking financing.
While an entrepreneurial venture will provide the founder with self-employment, all self-employment opportunities are not entrepreneurial opportunities. For example, if you buy a franchise, you will become self-employed. Operating a franchise, however, is often completely and fully specified in the franchise documents. Indeed, there is often little if any opportunity to be creative and entrepreneurial.
Franchises are well suited for individuals who do not want to create their own ventures and are not comfortable with the associated uncertainties. Many franchises provide an excellent return for the franchise owner. They will probably frustrate the true entrepreneur, however, as he or she must submit to the authority of the franchisor.
Self-employment may also be achieved by buying an existing business. While there is the opportunity to be entrepreneurial by developing new products or penetrating new markets, this action is not necessary. The owner of the business may choose to apply improved management skills to the existing business and concentrate on the bottom line.
Technical entrepreneurship is the creation of new technology-based ventures. Rather than starting a new barber shop or another hot dog stand, the focus is on ventures that involve technology, either the manufacture of a new product or the application of a new process.
The technical entrepreneur is therefore able to identify venture opportunities that take advantage of the benefits of some type of technology.
How can you prepare yourself to be a technical entrepreneur? As with any entrepreneurial venture, the key is experience in the industry. The more technologically or market-sophisticated the new venture, the more crucial is this experience. Indeed, most of the successful technology-based start-up ventures are launched by individuals who have "grown up" in their industries and with the associated technologies.
If you are thinking of becoming an entrepreneur, your first step is to examine yourself. Are you a person with vision? Are you comfortable with the level of risk starting a new venture will force upon you? Is your family supportive? Are you a creative and resourceful individual? Can you survive the start-up stage financially? Do you have the drive, motivation, commitment, and stamina required?
List your specific skills, your experience, your management skills, and any technologies with which you have some specialized or unique knowledge. If you do not have all the elements necessary for success and want to be an entrepreneur, start now to acquire the requisite experience, both technical and managerial. You will need it!
Every new idea that you think of will not be a viable opportunity for you. Only about 1% of the patents granted in Canada provide a commercial return to the inventor. This statistic supports the experience of the Canadian Industrial Innovation Centre/Waterloo, a private, not-for-profit corporation that helps individuals commercialize technological innovation. The centre has evaluated over 5,500 new product ideas and assisted more than 22,000 Canadian innovators. Over nine years of operation, the centre has seen a commercial success rate of 1 to 2%.
From reviewing case studies of successful clients, the Innovation Centre has recognized that, while the idea itself must have commercial merit, a key ingredient for commercial success is the skills of an entrepreneur who can identify a market niche and develop a venture to fill it.
When we talk about entrepreneurship, we are generally talking about the creation of new ventures. These ventures have been conceived and created by individuals where nothing previously existed. Entrepreneurship is therefore very much focused on individuals rather than enterprises.
It is the individual who must have the vision of the venture and the energy to make it a reality. Besides possessing drive, motivation and commitment, he or she must we willing to make sacrifices and take calculated risks in the interest of the new venture.
It is the individual who must identify the opportunity, evaluate its feasibility, determine if it really is a viable business, and bring together the resources to make the vision a reality. This includes building the management team, preparing the plan, and seeking financing.
While an entrepreneurial venture will provide the founder with self-employment, all self-employment opportunities are not entrepreneurial opportunities. For example, if you buy a franchise, you will become self-employed. Operating a franchise, however, is often completely and fully specified in the franchise documents. Indeed, there is often little if any opportunity to be creative and entrepreneurial.
Franchises are well suited for individuals who do not want to create their own ventures and are not comfortable with the associated uncertainties. Many franchises provide an excellent return for the franchise owner. They will probably frustrate the true entrepreneur, however, as he or she must submit to the authority of the franchisor.
Self-employment may also be achieved by buying an existing business. While there is the opportunity to be entrepreneurial by developing new products or penetrating new markets, this action is not necessary. The owner of the business may choose to apply improved management skills to the existing business and concentrate on the bottom line.
Technical entrepreneurship is the creation of new technology-based ventures. Rather than starting a new barber shop or another hot dog stand, the focus is on ventures that involve technology, either the manufacture of a new product or the application of a new process.
The technical entrepreneur is therefore able to identify venture opportunities that take advantage of the benefits of some type of technology.
How can you prepare yourself to be a technical entrepreneur? As with any entrepreneurial venture, the key is experience in the industry. The more technologically or market-sophisticated the new venture, the more crucial is this experience. Indeed, most of the successful technology-based start-up ventures are launched by individuals who have "grown up" in their industries and with the associated technologies.
If you are thinking of becoming an entrepreneur, your first step is to examine yourself. Are you a person with vision? Are you comfortable with the level of risk starting a new venture will force upon you? Is your family supportive? Are you a creative and resourceful individual? Can you survive the start-up stage financially? Do you have the drive, motivation, commitment, and stamina required?
List your specific skills, your experience, your management skills, and any technologies with which you have some specialized or unique knowledge. If you do not have all the elements necessary for success and want to be an entrepreneur, start now to acquire the requisite experience, both technical and managerial. You will need it!
Every new idea that you think of will not be a viable opportunity for you. Only about 1% of the patents granted in Canada provide a commercial return to the inventor. This statistic supports the experience of the Canadian Industrial Innovation Centre/Waterloo, a private, not-for-profit corporation that helps individuals commercialize technological innovation. The centre has evaluated over 5,500 new product ideas and assisted more than 22,000 Canadian innovators. Over nine years of operation, the centre has seen a commercial success rate of 1 to 2%.
From reviewing case studies of successful clients, the Innovation Centre has recognized that, while the idea itself must have commercial merit, a key ingredient for commercial success is the skills of an entrepreneur who can identify a market niche and develop a venture to fill it.
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